Risk Spotlight: Employee Benefits — Challenges and Opportunities in Uncertain Times
Published on: 03-Feb- 2011 | Comments: 0
by Greg Arms
The rising cost of health care benefits is one of the most significant issues facing employers today. Employer-sponsored health insurance costs have risen dramatically over the last two decades, and many experts believe that the recently enacted Patient Protection and Affordability Care Act will increase costs even further.
Employers today are striving to protect their employee benefit programs, which are an important employee recruiting and retention tool. But they remain concerned about the ability to fund benefits, and continue to seek ways to lower their cost burden. The global economic downturn has intensified this focus.
Holding the Line: Addressing Rising Costs
Many expect double-digit cost increases in 2011—caused in part by meeting requirements set by the PPACA. Effective Jan. 1, 2011, for example, employers were required to amend their plans to extend coverage to employees' adult children up to age 26, eliminate lifetime dollar limits, and provide full coverage of preventive services.
Employers continue to take a variety of actions to hold down cost increases.
- Employee cost-shifting remains: A key strategy. According to a recent Kaiser Family Foundation/ Health Research & Educational Trust survey, the share of health care premiums paid by employees has increased 159% since 1999, while the cost of employer- sponsored health care benefits has grown 138%. Employees paid an average of $3,997 toward the $13,770 cost of family coverage and $899 toward the $5,059 cost of single coverage in 2010, according to the study.
- Employers continue to move away from offering health maintenance organization (HMO) plans—the most expensive plan design. More are adding less expensive, high-deductible, consumer-driven health plans linked to health savings accounts (HSAs) or health reimbursement arrangements.
- Wellness and disease management programs continue to play a more active role in employers’ efforts to manage costs.
- There is a movement among some employers to replace a portion of their full-time workforce with part-time or temporary workers who typically are not eligible for health insurance benefits. There also is some concern that employers, especially at smaller companies, may elect to drop health benefits altogether and pay the penalty of $2,000 per full-time employee.
Beyond Cost Cutting: Employers Look for Guidance
In addition to various cost-cutting measures, employers would be well-served to implement the following strategies in order to stay competitive:
- Market and Cost Analysis: A market analysis helps employers understand health care cost trends and provides insight into their total health care dollar spending. A cost analysis of an employer’s existing benefits plan, including a review of the employer’s plan's pricing across industries and broad national markets, helps employers get the most out of every benefit dollar.
- Employee Communication: Employees' satisfaction with their benefits is driven by communications that create program awareness, deliver relevant benefits messages, and leverage multiple communication channels to reach throughout an employer’s organization. Effective communications can improve employee satisfaction, increase employee retention, and drive possible improvements in productivity while decreasing absenteeism.
In these uncertain times, employers increasingly are relying on their benefit advisors for information and advice. Employers want to know what kind of benefit packages their competitors are offering. And they are seeking assistance with plan design, regulatory compliance, reporting requirements, employee communications, health plan enrollment, and plan administration.
As employers begin to emerge from the global recession, they need to begin refocusing their efforts on talent recruitment and employee loyalty. Employee benefits play a critical role in that effort.
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